Hospital Billing and Reimbursement Chapter 16

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2. Chapter 16 2 Learning Outcomes After studying this chapter, you should be able to: 16.1 Distinguish between inpatient and outpatient hospital services. 16.2 List the major steps relating to hospital billing and reimbursement. 16.3 Describe two differences in coding diagnoses for hospital inpatient cases and physician services.

3. Chapter 16 3 Learning Outcomes (Continued) 16.4 Describe the classification system used for coding hospital procedures. 16.5 Describe the factors that affect the rate that Medicare pays for inpatient services. 16.6 Discuss the important items that are reported on the hospital health care claim.

4. Chapter 16 4 Key Terms Admitting diagnosis (ADX) Ambulatory care Ambulatory patient classification (APC) Ambulatory surgical center (ASC) Ambulatory surgical unit (ASU)

5. Chapter 16 5 Key Terms (Continued) 837I Emergency Grouper Health information management (HIM) Home health agency (HHA) Home health care Hospice care Inpatient

6. Chapter 16 6 Key Terms (Continued) Outpatient Prospective Payment System (OPPS) Present on admission (POA) Principal diagnosis (PDX) Principal procedure

7. Chapter 16 7 Hospital Billing Medical insurance specialists should be aware of coding and billing systems used in hospital settings to understand possible physician/hospital financial arrangements impact of staff privileges patients’ total medical expenses for inpatient stays and surgical procedures

8. Chapter 16 8 Health Care Facilities: Inpatient vs. Outpatient Inpatient Outpatient

9. Chapter 16 9 Inpatient vs. Outpatient Inpatient Outpatient

10. Chapter 16 10 Inpatient vs. Outpatient Inpatient Outpatient

11. Integrated Delivery Systems Various types of providers and facilities are joining together to provide a continuum of care for patients (for example, acute care hospital, rehab facility, long-term care facility, and home care program). Chapter 16 11

12. Chapter 16 12 Hospital Claim Processing Three major steps for insurance processing in a patient’s hospital stay: Admission Treatment Discharge Under HIPAA, hospitals must present patients with a copy of their privacy practices at admission.

13. Inpatient Consent Form Hospital consent forms typically contain the same kinds of items found in medical practice consent forms, as well as three unique items: Responsibility for patient’s personal possessions Advance directives covering patient’s desires for receiving health care Acknowledgement of receipt of “An Important Message From Medicare” Chapter 16 13

14. Chapter 16 14 Hospital Claim Processing Admission Treatment Discharge

15. Chapter 16 15 Hospital Claim Processing Admission Treatment Discharge

16. Chapter 16 16 Hospital Claim Processing Admission Treatment Discharge

17. Chapter 16 17 Inpatient vs. Outpatient Diagnostic Coding Outpatient Main diagnosis is called the primary diagnosis Primary diagnosis is the main reason patient sought treatment Rule out diagnoses are not used Inpatient Main diagnosis is called the principal diagnosis (In situations where there are multiple diagnoses, there are specific rules to address the correct sequencing of the diagnoses) Principal diagnosis is established after study in a hospital setting Rule out diagnoses are acceptable – usually as an admitting diagnosis

18. Chapter 16 18 Inpatient Diagnosis Coding Comorbidities and Complications Shown in patient medical records as CC May list multiple CCs on claim Comorbidities (co-existing conditions) are other conditions that affect a patient’s stay or course of treatment Complications develop from the treatment or as a result of surgery

19. Chapter 16 19 Inpatient vs. Outpatient Procedural Coding Outpatient CPT is used for procedural coding ICD-9-CM, volumes 1 and 2, are used to code diagnoses Inpatient Volume 3 of the ICD-9-CM is used for procedural coding The 3rd or 4th digits of the codes are assigned based on the principal diagnosis

20. Chapter 16 20 Payers and Payment Methods Medicare and Hospital Billing CMS created diagnosis-related groups (DRGs) based on the relative value of the resources used nationally for patients with similar conditions. Factors such as age, gender, comorbidities, and complications were considered. The DRGs that use more resources, are paid at a higher rate. MS-DRGs (Medicare-Severity DRGs) were created in 2008 to better reflect the different severity of illness among patients who have the same basic diagnosis.

21. Chapter 16 21 Medicare and Hospital Billing Each hospital negotiates a rate for each DRG with CMS, based on Its geographical location Labor and supply costs Teaching costs Medicare pays for inpatient services under the Inpatient Prospective Payment System (IPPS) which uses MS-DRGs to determine the number of hospital days and services that are reimbursed

22. 22 Inpatient Diagnosis Coding Present on Admission (POA) Indicator A present on admission indicator must be designated for every diagnosis upon discharge. POA means that the condition existed at admission and was not developed during the hospital stay. CMS and many other health plans will no longer pay for treating complications caused by avoidable conditions called “never events”

23. Chapter 16 23 Medicare and Hospital Billing Quality Improvement Organizations (QIOs) Composed of physicians and other health care experts under contract with CMS to review Medicare and Medicaid claims for appropriateness of stay and care QIOs also investigate patient complaints about quality of care

24. Chapter 16 24 Medicare and Hospital Billing Outpatient Prospective Payment Systems (OPPS) Instead of DRGs, OPPS use an ambulatory patient classification (APC) system. Reimbursement is based on preset amounts for each APC group to which the service is assigned.

25. Chapter 16 25 Claims and Follow-up Hospitals must file Medicare Part A claims using the HIPAA 837I Health Care Claim In some cases, the paper claim calledUB-04 is also accepted by payers

26. Chapter 16 26 837I Health Care Claim “I” stands for “Institutional” (physicians’ claim is called 837P for “Professional”) EDI format, similar to the 837 claim

27. Chapter 16 27 837I Health Care Claim Contains sections for Billing and pay-to provider Subscriber and patient Payer Claim details Service level details

28. Remittance Advice Processing Hospitals receive a remittance advice (RA) when payments are transmitted by payers to their accounts. The patient accounting department and HIM check that the correct payment has been received and follow up, if necessary. Chapter 16 28

29. Hospital Billing Compliance Federal and state laws must be complied with by both inpatient and outpatient facilities. To uncover fraud, a major target of the Office of the Inspector General (OIG) has been the upcoding of DRG groups. Chapter 16 29